The E-Commerce War - A Double Edged Sword

Posted in Operations & IT Articles, Total Reads: 544
, Published on 02 December 2015

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‘The only thing constant in this world is change’.

One sort of change happened in 1998 in India too and that was E-commerce. The first E-commerce company in India was set up in 1998 in the name FabMall. E-commerce took a 360◦ turn with the advent of Internet in 1990s and expanding through various business aspects it evolved to trade also-

• Tangible goods ( Clothes, gadgets etc)

• Intangible goods (software, solutions etc)

• Services (writing reviews, booking tickets etc)

It is not wrong to put Ecommerce as a double edged sword. On one side customers have the benefits of less priced products, comfort while shopping online and the star feature of returns, the bitter end has its roots in the fact that everyday thousands of customers complain to ecommerce companies of cheating as they are sold counterfeited products. This not only dilutes the brand image of the products that are counterfeited but also tinkers with the customers’ emotional side and the problems they face in such cases.

Image: pixabay

In a bid to tap India’s $500 billion retail sector, companies are taking the route of ‘Predatory Pricing’ to grab as much market share as they can. One such case was seen recently in case of Flipkart’s Big Billion Day when the customers were cheated in the name of heavy discounts as price of the products were first increased and then discounted to lure in more customers. Also prices of some premium brands were reduced to very low levels that these brands threatened to opt out of Flipkart’s umbrella. Technical glitches scarred customer experiences to such an extent that they started bad-mouthing the site with hash tags like # Flopkart and # FakeKart on social media.

As a result, Snapdeal and Amazon responded to Flipkart’s failure as a strategic move to lure customers by innovative ad campaigns. So, in the wake of such hokum the companies became ‘competitor centric’ rather than ‘customer centric’. This might be good for the companies but customers do get a fair share of problems in such scenarios. Several other examples can be cited when the servers of these big companies crashed:

• Amazon India website crashed temporarily in October, when the company was holding its week-long 'Diwali Dhamaka' sale.

• Flipkart website's first crash since inception took place on July 23, when Xiaomi's Mi 3 mobile phone went on sale exclusively on the site.

• Air India's website went down temporarily due to overload on August 27, after it offered tickets at Rs 100 each.

Also, E-commerce websites in India are not following any set rules to pay taxes as there are so many ambiguities and this is eating into Government’s share of fair taxes. As and when the ecommerce industry is regulated, it might propel a complete turnaround in the way these giants operate. There will be strict regulations against pricing mechanism followed by these companies and it will then become more legally binding on these companies to follow a certain set of rules like the brick and mortar channels do.

So, ecommerce in India have had its fair share of problems and glitches but still customers flock to these e-retailers and they don’t seem tired of buying online. Customers just become prey to the heavy advertising that these companies do and pull in customers by giving them hefty discounts. New customers are emerging in the market as they get their hands on smart phones and tablets through which currently 30% of the ecommerce business is done. So, ecommerce is making good use of ‘Creative Destruction’ as old dissatisfied customers are being replaced with new ones.

On the plus side e-commerce has bridged the gap between vendors and customers, and also fuelled customer to customer sales (Quikr.com). It has been said that ecommerce is affecting the offline retailers badly. But again as the law of nature says ‘the equilibrium is always established’ and this equilibrium is fastened by small vendors who were earlier not able to sell their products now have access to a trade place i.e. online channels. Also, several C2C transactions are booming to help people get rid of the products that they don’t require anymore and pass on to the people who want these products. The benefit of this aspect is that there is no middle men involved and the transactions are negotiated mutually.

The major drivers of Indian E-commerce have been:

- Internet and 3G penetration

- Growing Living standards

- Much wider product range online

- Hectic lifestyles and time crunch for offline shopping

These four factors have played a major role in laying the foundation for the growth of e-commerce in India like never before. Certainly, consumers want to enjoy the benefits of cash on delivery, discounts, coupons, 30 day returns which they don’t find easily in case of offline channels. Also, new ideas like online grocery stores are gaining popularity in India due to absolute convenience, ease of shopping and a market that responds quickly. Punexpress.com and Atadaal.com have already entered the market and are gaining popularity. Discounted products and free home delivery are the starrers. All of these stores are targeting the Indian housewives, who are yet to move to e-commerce way of shopping.

Also, Indian e-commerce is relatively in the nascent stages if it is compared to USA, China and UK’s e-commerce. After so many years of presence, e-commerce is still booming in China and USA and thus a trend setter so far. Similar growth pattern can be seen in India also. In my view point many new categories will open up in near future like spare parts, car accessories and many more. As far as near future of e-commerce in India is concerned I believe more and more tier 2 and tier 3 cities will start shopping online and as e-commerce hits maturity many B2B companies will also emerge.

Lastly, there will not be much difference between online and offline shopping in the coming years. Physical retail outlets will start offering a wide range of products. Another important factor will be payments. As we pay now for online shopping, we will start paying this way for offline shopping as well. Thirdly, offline retailers have also started delivering their products to the customers directly to their homes. There might be no e-commerce in future as the wall between online and offline gets shattered leaving behind only a legacy.

Finally, it all boils down to profitability. Till now only few companies have shown profits and that too in scenario when competition was low but with increasing competition it will be interesting to see how these companies survive by giving hefty discounts. Only time will tell us whether this industry deepens its roots or it gets rooted out of India after having enjoyed its most glorious of days.